The special characteristic of the tax package accompanying the 2016 Budget Bill is that it is the shortest of its kind in a decade, consisting only of slightly more than 30 articles that include no new tax types or higher tax rates. Accordingly, common public charges will be lower or left unchanged, Minister of State for Parliamentary Affairs András Tállai said.

The Minister of State pointed out that as the Parliament is supposed to adopt the 2016 Budget Bill very early; in the first half of the year, the predictability and credibility of economic policy will improve. The tax package and the 2016 Budget will be concurrently debated by the National Assembly, he added.

Among the new measures, András Tállai highlighted a new tax incentive for enterprises which can increase pre-tax revenues at least five-fold from one year to next: these will be exempt from paying corporate income tax for two years.

In case of new public utility infrastructure, the new tax will be payable from the sixth year after instalment, and this incentive will also be applicable for the reconstruction or renewal of Internet infrastructure.

The Government aims to incentivize family doctors through the amendment of the local business tax law, proposing to allow local governments to exempt family doctors from paying this levy. As a result, some HUF 1.5bn is expected to remain at some 6300 doctors, reducing liabilities by as much as HUF 200 thousand per year and taxpayer, he added.

Speaking about amendment proposals that have already been revealed, András Tállai mentioned that the personal income tax rate will be reduced from the current 16 percent to 15 percent, leaving HUF 120bn at families.

The amount of family tax allowances will rise further, as – in line with the former promise of the Government – in 2016, families with two children can deduct HUF 12 500 – increased of the current HUF 10 000 – per child from their tax base, and this allowance will gradually increase in the next three years, reaching HUF 40 000 per child by 2019.

VAT is also expected to change in case of pork, from 27 percent to 5 percent, thus leaving HUF 25bn at consumers. The Minister of State emphasised that the Government is weighing the option of reducing VAT on other basic foods. Lower VAT, he stated, must be reflected by end-prices.

In accordance with the MoU concluded with the EBRD, the rate of bank tax will also be lowered in 2016, from 0.53 percent of balance sheet total to 0.31 percent, and this measure will cut the costs of financial institutions by HUF 60bn. In exchange, the Government expects banks to increase lending and thus contribute to the financing of the Hungarian economy.

Finally, András Tállai said that the reduction of the advertisement tax has not been added to the current tax package, which will be submitted to Parliament separately.

(Ministry for National Economy)